Creditor and Debtor Disputes in Washington, DC

When a debtor moves assets, the transfer itself can be attacked. D.C. Code § 28–3104 makes a transfer fraudulent as to present and future creditors where it was made with actual intent to hinder, delay or defraud, or, without proof of intent, where it was made without receiving reasonably equivalent value in the circumstances the statute describes. § 28–3105 covers present creditors and insolvency. The remedies in § 28–3107 include avoidance, attachment, an injunction, and appointment of a receiver.

When is a transfer attackable?

A transfer is fraudulent as to a creditor either where the debtor acted with actual intent to hinder, delay, or defraud, or where the debtor parted with an asset without receiving reasonably equivalent value while thinly capitalized.

(a) A transfer made, or obligation incurred, by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) With actual intent to hinder, delay, or defraud any creditor of the debtor; or (2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor: (A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or (B) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.

D.C. Code § 28–3104(a)

(a) A transfer made, or obligation incurred, by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

D.C. Code § 28–3105(a)

What can a creditor obtain?

Remedies reach the asset itself: a creditor may obtain avoidance of the transfer to the extent needed to satisfy the claim, an attachment against the transferred asset, and an injunction against further disposition.

(a) In an action for relief against a transfer or obligation under this chapter, a creditor, subject to the limitations in section 28-3108, may obtain: (1) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim; (2) An attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the procedure prescribed by sections 16-501 through 16-584; (3) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure: (A) An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property; (B) Appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or (C) Any other relief the circumstances may require.

D.C. Code § 28–3107(a) — Remedies of creditors

Attachment runs through the procedures at §§ 16–501 to 16–584, as § 28–3107(a)(2) provides. Where a receiver is the right answer see court-appointed receiverships; for urgent applications see emergency injunctions.

What protects the transferee?

These claims are not unlimited, and a page that ignored the defenses would be misleading. § 28–3108 sets out defenses, liability and protection of a transferee, and § 28–3107(a) is expressly subject to it. § 28–3109 governs extinguishment of the cause of action.

Where the debtor is a business owner who took company money, see partner diverting company funds.

How does D.C. law treat a transfer made to defeat a creditor?

Where a debtor moves assets, the transfer itself can be attacked, and the statute supplies both the theory and the remedy. Section 28–3104 does not always require proof of intent; the alternative branch turns on reasonably equivalent value.